Metropolis Healthcare Limited — Q3 FY25 earnings call

Call held 5 Feb 2025

Management summary

Metropolis Healthcare reported a resilient Q3 FY25 with 10.9% YoY revenue growth to INR 323 crores, driven by strong B2C performance (up 15% YoY). EBITDA grew 9.4% to INR 71.6 crores, with a margin of 22.2%. The company is progressing with the acquisition of Core Diagnostics, expected to be EPS accretive from year one, and is actively pursuing further inorganic growth opportunities. While Q3 saw a temporary dip in acute patient volumes and margin dilution from the Core acquisition is anticipated initially, management expects a rebound in Q4 and continued margin expansion post-integration.

Highlights

  • Revenue for Q3 FY25 stood at INR 323 crores, a growth of 10.9% Y-o-Y.

  • B2C revenues grew by 15% Y-o-Y to INR 178 crores, now accounting for 55% of total revenue.

  • Reported EBITDA for Q3 FY25 was INR 71.6 crores, a growth of 9.4% Y-o-Y.

  • Core Diagnostics acquisition is expected to be EPS accretive from year 1.

  • Net cash surplus of INR 205 crores as of 31st of December 2024, with a working capital cycle of 13 days.

Concerns

  • Low volume of acute patients in Q3 FY25, which impacted overall volumes and margins temporarily.

  • Core Diagnostics acquisition will result in margin dilution for the first 12 months, taking 2-3 years to reach Metropolis's margin profile.

  • Dollar depreciation is acknowledged as a factor impacting gross margins, though management aims to mitigate through efficiencies.

Key financials

2 periods

Q3 FY25

  • Revenue
    ₹323 Cr
    YoY +10.9%
  • Patient Volume Growth
    4.1%
  • Test Volume Growth
    6%
  • Revenue per Test Growth
    4%
  • EBITDA
    ₹71.6 Cr
    YoY +9.4%
  • EBITDA Margin
    22.2%
  • PAT
    ₹31.5 Cr
    YoY +15%
  • PAT Margin
    9.8%

9M FY25

  • Revenue
    —
    YoY +12.5%
  • Patient Volume Growth
    6%
  • Test Volume Growth
    8%
  • EBITDA
    ₹241.3 Cr
    YoY +17.8%
  • EBITDA Margin
    24.5%
  • PAT
    ₹116.3 Cr
    YoY +26.5%
  • PAT Margin
    11.8%

What they filed

Q1 FY27: revenue up 14.8%, net profit up 41.7% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue322 297 312 324 356 +11%335 +13%352 +13%372 +15%
EBITDA82 65 53 77 91 +11%80 +23%90 +70%94 +22%
Net profit42 27 24 36 47 +12%32 +19%43 +79%51 +42%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • B2C
    ₹178 Cr Revenue55% Share of Total Revenue25% Wellness Growth20% Specialty Growth5% Patient Volume Growth5% Test Volume Growth
  • B2B
    10% Revenue Growth21% Wellness Growth9% Specialty Growth4% Patient Volume Growth7% Test Volume Growth
  • TruHealth
    17% Revenue Share25% Revenue Growth
  • Specialty Segment
    37% Revenue Contribution13% Revenue Growth

Capital allocation

high confidence
  • Capex Capex disclosed
    • Lab expansion (7 new labs in Q3, 23 labs in 9M FY25)
    • Collection center expansion (125 new centers in Q3)
    We have also made significant strides in the final phase of our aggressive network expansion strategy, adding 7 new labs and 125 centers this quarter, bringing our presence to over 750 towns across the country now.
  • M&A Core Diagnostics Acquisition · Closed · Consideration ₹[object Object] (mixed)

    Reinforcing leadership in high-end specialty diagnostics and strengthening commitment to innovation in advanced testing.

    EPS accretive from year 1; margin dilution for first 12 months, reaching Metropolis margin profile in 2-3 years.

    We will be closing the Core Diagnostics transaction by February end and MSL March consolidated numbers should include Core Diagnostics if all goes according to the time line planned. We will be using approximately INR 135 crores of internal cash for this acquisition, and the balance will be a stock swap.
  • M&A Local labs in northern markets Acquisition · Announced

    Expanding footprint in the region through acquisitions focused on creating a string of pearls that enhance presence and capability; acquiring local labs with strong brand recognition and deep consumer connections.

    Expected to be high EBITDA, high ROCE and strong OCF businesses, acquired at lower multiples.

    We are actively pursuing additional inorganic growth opportunities with several potential targets currently under consideration, especially in northern markets. We are optimistic about achieving early closure on these opportunities. Our strategy is focused on acquiring local labs that have strong brand recognition and deep consumer connections within their regions.
  • Liquidity Cash ₹205 Cr Net cash surplus as of 31st of December 2024, with a working capital cycle of 13 days.
    On to the balance sheet. We have a net cash surplus of INR 205 crores as of 31st of December 2024. We also have a working capital cycle of 13 days.

Guidance & targets

Revenue

  • Revenue Growth Revenue · Q4 '25 · High confidence approximately 13%
    We remain on track to achieve our guidance of approximately 13% revenue growth in Q4

    — Ameera Shah

  • Overall Revenues from Micro Marketing Strategy Revenue · starting quarter 4 · High confidence positive 2% increase
    The net impact of this strategy is expected to deliver a positive 2% increase in overall revenues starting quarter 4

    — Surendran Chemmenkotil

Profitability

  • EBITDA Margin Profitability · Q4 '25 and going forward · High confidence 25% plus
    and EBITDA margins in the range of 25% plus for Q4 '25 and going forward, reaffirming the strength of our strategy and execution.

    — Ameera Shah

  • Core Diagnostics Margin Profile Profitability · 2 to 3 years · Medium confidence Metropolis margin profile
    It will take up to 2 to 3 years to reach the margin Metropolis margin profile.

    — Ameera Shah

  • Core Diagnostics EPS Accretion Profitability · from year 1 · High confidence EPS accretive
    However, it will be EPS accretive from year 1

    — Ameera Shah

Capacity

  • Collection Centers per Lab Ratio Capacity · at the end of 2 years from now · Medium confidence 30 collection centers for a lab
    Maybe at the end of 2 years from now, this could be 30 collection centers for a lab.

    — Surendran Chemmenkotil

Market Share

  • B2C Share of Revenue Market Share · in the next 2 to 3 years' time · Medium confidence around 8% to 10% upside
    So we should definitely get into around 8% to 10% upside in the next 2 to 3 years' time on the B2C segment.

    — Surendran Chemmenkotil

Capex

  • Normal Lab Expansion Capex · a year (post FY25/26) · High confidence 5 or 6 labs
    And from '25, '26, it will be just a normal lab expansion, which will be few labs a year, probably 5 or 6, but not more significant than that.

    — Ameera Shah

What to watch in Q4 FY25

Core Diagnostics Integration & Contribution

Q4 FY25 (March contribution), Q1 FY26 (full integration progress)
Current Acquisition closing by Feb end, contributing from March FY25
Target Initial revenue contribution, progress on integration

Why it matters

Major acquisition, impact on revenue and initial margin dilution.

We aim to finalize the acquisition by the end of this month with Core expected to contribute to MHL's revenue starting in March of this financial year.

Risks & concerns

  • Low volume of acute patients

    medium

    Q3 FY25 saw a surprising low volume of acute patients, impacting volumes and margins, but considered a temporary seasonal fluctuation with rebound expected in Q4.

    Since Metropolis business is majority acute in nature, therefore, the volume impact in Q3 has been surprising for us. However, we consider this a temporary seasonal fluctuation, and early indicators in Q4 suggest a rebound in volumes as we saw in H1.

    Management downplayed

  • Margin dilution from Core Diagnostics acquisition

    medium

    Core Diagnostics acquisition will dilute group-level margins for the first 12 months, taking 2-3 years to reach Metropolis's margin profile.

    While we anticipate Core revenue growth to be strong and margins of Core to move up fairly in year 1 of acquisition, the margin profile will be lower than Metropolis for the first 12 months and will dilute the margin temporarily. It will take up to 2 to 3 years to reach the margin Metropolis margin profile.

    Management acknowledged

  • Impact of dollar depreciation on gross margins

    low

    Dollar depreciation is a factor impacting gross margins, but management aims to mitigate through efficiencies and productivity.

    All right. So we definitely have some impact of the dollar. There's no doubt about it. But we, at the same time, start figuring out how better negotiation and better efficiencies can chip in. So as a result, largely, we try to kind of take care of the increased pressure because of dollar through our efficiencies and our productivity, et cetera.

    Analyst acknowledged

  • Competition in B2B segment driving price discounts

    low

    Some players continue to push for price discounts in the B2B segment, but Metropolis has maintained its discounting structure.

    So on the B2B segment, we definitely see continued efforts by some of the players to bring down the discounts, particularly on the tail end of the B2B segment, who really keep pushing the operators for the price discounts. But as far as Metropolis is concerned, we just stayed put with our discounting structure.

    Analyst acknowledged

Q&A highlights

8 direct
Pricing Strategy, Discounting, and Volume Growth Direct
So we did market-specific pricing, not necessarily product specific across the board. So only a few markets, prices have gone up, and a few markets, we corrected the prices downwards. The net impact, like I said, is about 2%.

Clarifies the nuanced approach to pricing adjustments and the expected revenue impact, along with the stance on B2B discounting.

Asked by Prakash Kapadia

Acquisition Strategy and Financial Accretion (EPS/ROCE) Direct
So whatever acquisitions we are doing, for example, even Core Diagnostics, will be EPS accretive from year 1. And the reason for this is because Core Diagnostics on its own did not make any significant profit. And obviously, under the Metropolis umbrella, there's a different plan, not only to ramp up the revenue, but to also create operational synergies and, therefore, over time, bring it to a similar Metropolis margin profile.

Addresses investor concerns about acquisitions diluting key financial metrics, emphasizing the strategic rationale and expected accretion.

Asked by Aniket Kulkarni

Post-COVID EBITDA Levels and Future Outlook Direct
Now as we have said that by the end of FY '24, '25, we will be at the end of this accelerated lab expansion project. And from '25, '26, it will be just a normal lab expansion, which will be few labs a year, probably 5 or 6, but not more significant than that. And that will allow us, therefore, our margin expansion to continue.

Provides clarity on the company's strategic shift from aggressive lab expansion to a more normalized pace, signaling future margin expansion.

Asked by Aniket Kulkarni

Micro Marketing Strategy Sustainability and Impact Direct
So I mean, each of these markets, very carefully, we have just looked at it and whatever correction needs to be done, we started initiating those corrections. So which is, like I said, with respect to price, with respect to distribution, with respect to logistics, with respect to test menu. Now we looked at each of these markets separately and we've done the required course correction, or we are in the process of completing the course correction. So as a result of all this, we will be able to gain a couple of percentage more revenues going forward.

Explains the detailed, multi-faceted approach of the micro-marketing strategy and its expected sustainable positive impact on revenue.

Asked by Kunal

TruHealth Channel Mix and Realization Differences Direct
Well, I think most part of it is coming from the B2C channel. When I say B2C channel, one, of course, you have a digital channel, and then second, you have the brick-and-mortar channel. Both put together is where majority of this B2C revenue is coming from. And then now even the B2B markets, B2B partners also started participating in the TruHealth journey. ... No, no, not 15%, 20%, maybe 3% to 4% difference.

Clarifies the primary channel for TruHealth growth and quantifies the realization difference between B2C and B2B, which is less significant than the analyst's initial assumption.

Asked by Kunal

Collection Center to Lab Ratio Improvement and Margin Impact Direct
So the next 2 years, we'll definitely see the ratio getting better. Maybe at the end of 2 years from now, this could be 30 collection centers for a lab. So that's actually the endeavor. That's the plan that we have in mind.

Confirms the strategic focus on improving operational efficiency through a higher collection center to lab ratio, which is expected to drive margin improvement.

Asked by Nikhil Mathur

Growth Drag and B2C Expansion in North/East Direct
But the drag has obviously come, like we said, from the institutional business, which is not a priority for us. Now within this B2C growth of different markets, like we said, Maharashtra, Gujarat, some markets in South are doing well for us and growing fast. And obviously, we don't do much of B2C business in the North and very little in the East as well. The business there is more B2B or institutional. So I think these are the markets where we will try to increase the B2C, in the North and the East.

Identifies the specific segment (institutional business) causing growth drag and outlines the strategic focus on expanding B2C in underpenetrated northern and eastern markets.

Asked by Nikhil Mathur

Q3 EBITDA Margin Explanation and Acute Illness Impact Direct
Now coming particularly to quarter 3, 2 things have happened differently. One is between quarter 3 and quarter 4, we really got accelerated on our lab expansion. We've just got in about 13, 14 new labs only in these 2 quarters which has come in. So which has come with an additional cost for the time being and not necessarily the corresponding revenues immediately, right? So that has definitely added some cost on to us in quarter 3. And secondly, like Ameera mentioned in her opening speech, we have seen some decline in the illness patterns in quarter 3, particularly on the acute diseases.

Provides a clear explanation for the Q3 margin dip, attributing it to accelerated lab expansion costs and an unexpected decline in higher-margin acute illness volumes.

Asked by Shyam Srinivasan

3 min read 7 chapters

Detailed narrative

Q3 FY25 Performance Overview

Metropolis Healthcare delivered a strong Q3 FY25, with revenue growing 10.9% year-on-year to INR 323 crores, primarily driven by a 4.1% increase in patient volumes. The remaining 6.5% of growth came from strategic adjustments in product mix and pricing. Reported EBITDA stood at INR 71.6 crores, marking a 9.4% year-on-year growth, with an EBITDA margin of 22.2%. PAT for the quarter increased by 15% year-on-year to INR 31.5 crores, achieving a 9.8% PAT margin. For the nine months ended December, revenue increased by 12.5% and EBITDA grew 17.8% to INR 241.3 crores, with a 24.5% margin.

B2C Segment Momentum and Strategic Focus

The B2C portfolio continued its strong momentum, achieving 8 consecutive quarters of steady growth. In Q3 FY25, B2C revenue grew 15% year-on-year to INR 178 crores, now accounting for 55% of total revenue, an improvement of 200 basis points from the previous year. This growth was led by TruHealth and Specialty testing, which grew 25% and 20% respectively. Maharashtra, a key market, saw B2C segment growth of 16% year-on-year, highlighting the strength of the brand and customer loyalty. The company aims to increase B2C contribution by 8-10% in the next 2-3 years.

Core Diagnostics Acquisition and Integration

Metropolis is set to finalize the acquisition of Core Diagnostics by the end of February 2025, with Core expected to contribute to revenue starting March FY25. The acquisition, valued at approximately INR 135 crores in internal cash plus a stock swap, is a major milestone to reinforce leadership in high-end specialty diagnostics. A steering committee has been established to ensure smooth integration, focusing on restructuring, talent retention, operational efficiencies, IT system integration, and cross-selling opportunities. While the acquisition is expected to be EPS accretive from year one, it will temporarily dilute group margins for the first 12 months, with margin parity targeted in 2-3 years.

Inorganic Growth Pipeline and Strategy

Beyond Core Diagnostics, Metropolis is actively pursuing additional inorganic growth opportunities, particularly in northern markets, with several potential targets currently under consideration. The strategy focuses on acquiring local labs that possess strong brand recognition and deep consumer connections within their regions. These bolt-on acquisitions are characterized by high EBITDA, ROCE, and OCF ratios, and are expected to create substantial long-term value by leveraging Metropolis' brand leadership and capabilities to scale their operations and drive sustainable growth.

Micro Marketing and Customer-Centric Initiatives

To address market challenges and opportunities, Metropolis has implemented region-specific micro-marketing strategies. These include customized market-relevant price rationalization, revamped partner models for increased engagement, efficiency improvements in logistics, and tailored test menus for unique regional demands. Additionally, customer-centric initiatives such as integrated testing packages, home-based ECG services, and the AI-powered MedAdvisor recommendation engine have been launched. These strategies are expected to deliver a positive 2% increase in overall revenues starting Q4 FY25.

Network Expansion and Operational Efficiency

In Q3, Metropolis added 7 new labs and 125 collection centers, expanding its presence to over 750 towns. The aggressive lab expansion phase is expected to conclude by FY25/26, with future focus shifting to accelerating collection center additions rather than new labs. The company aims to improve the collection center to lab ratio to 30:1 within the next two years, which is expected to enhance operating leverage and profitability. Technology upgrades, including a new mobile app with personalized health dashboards and AI-driven recommendations, are also enhancing operational efficiency and customer experience.

Q3 Volume and Margin Headwinds

Q3 FY25 presented challenges due to a surprisingly low volume of acute patients, which impacted overall diagnostic volumes and margins, as Metropolis' business is predominantly acute. This trend was considered a temporary seasonal fluctuation, with early indicators suggesting a rebound in Q4. The Q3 EBITDA margin of 22.2% was also impacted by additional costs from accelerated lab expansion, with 13-14 new labs coming online in Q3 and Q4, incurring costs before corresponding revenues materialize. Management expects a return to the 9M EBITDA margin trend of 24.5% in Q4.

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